Wild budget swings

Wild budget swings

Wild budget swingsby Fred McMahon

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14/02/1999 The Moncton Times and Transcript, The Halifax Daily News

Last December, the New Brunswick government projected a razor thin surplus. Camille Theriault has said he’ll be more liberal with spending than his predecessor Frank McKenna. And, road-paving season – otherwise known as an election – may arrive with the spring.

Those are the same ingredients that in Nova Scotia destroyed the difficult and painful work of balancing the budget with a flurry of bizarre spending decisions that have left the budget numbers bouncing up and down like a bungee jumper.

In fact, it might be a good idea if Nova Scotia’s finance department started a course of medication. The department’s hallucinations and wild mood swings – from electoral euphoria about a balanced budget to the downer of Canada’s most whacked-out budget – must be replaced by some pretense of sanity.

Last year, Nova Scotia Liberal Premier Russell MacLellan campaigned on the vision of a balanced budget. Soon after the election, that vision turned to hallucination, and finance department officials spotted a new apparition on the horizon. The Deficit Monster hove into view – and then started growing larger and larger, until finally it loomed $110 million tall.

Welcome to Nova Scotia in Wonderland. If “one pill makes you larger,” then perhaps one can make the monster smaller. Nova Scotia’s $110 million deficit monster of the second quarterly report shrunk to $50 million in the third quarterly report. In other reports for this fiscal year, it had been a $1.2 million surplus and an $82 million deficit.

Finance Minister Don Downe wants Nova Scotians to believe the new deficit monster is less dangerous than cuddly, like Puff the Magic Dragon, and one day it’ll just disappear. In reality, it remains Canada’s worst deficit–by a monstrously massive margin.

British Columbia’s NDP government has been slammed for its fiscally irresponsible and incompetent ways. Government support is barely in the double digits. Richard Nixon was more popular in his last painful days.

If only Nova Scotia’s government were so competent. Even our shrunken monster has a mightier growl than the deficit hovering over the wet coast. On a per capita basis, Nova Scotia’s projected deficit is more than twice the size of British Columbia’s projected $95 million deficit. (BC’s population is four times that of Nova Scotia, it’s economy larger again.)

Finance department officials in both Nova Scotia and British Columbia seem to be off their medication. British Columbia officials are hinting their deficit took the “one pill makes you larger” medicine, and will likely be five times larger than projected.

Ah, but Nova Scotia’s Puff the Magic Deficit is still mightier, because our Puff has invisible friends. They’re lurking in the health care system. Estimates of the system’s budging gremlins vary – after all they’re invisible – but the system may be $250 million in the hole.

The route Nova Scotia took down this anti-gold brick road has a Wizard of Oz feel to it – much sound and fury, but all illusion in the end. Here’s a juicy tidbit. The province’s balanced budget may have been based on outdated information from the day it was unveiled.

In November 1997, Michelin announced it would hit job targets negotiated with the government. That helped the Liberals in the spring election. But, Michelin’s success required the government to write-off loans to Michelin.

That write-off didn’t show up in the immediate post-election budget which promised a $1.2 million surplus. The budget was tabled more than half a year after Michelin’s announcement. Instead, the write-off appeared the first quarterly report, when the province revealed its surplus had morphed into an $82 million hole, a large chunk of that due to budget overruns in Economic Development because of the loan write-off.

Had no one in economic development thought to tell the finance minister that they had this nasty obligation on the books? Whether negotiated or not at the time of the budget, it was a foreseeable expense that should have been in the province’s fiscal projections.

Nova Scotia must get its budgeting house in order. Quarterly reports should be predictable affairs, not times of high mystery and surprise endings.

There is no excuse for having two departments – economic development and health affairs – way over budget. The idea of a budget is to make reasonable predictions on expenditure, and the people the province hires to do it should have the required ability.

Fluctuations of the Canadian dollar also had a big impact on the budget. The finance department needs to learn there is a larger economy out there and leave room for unexpected developments. The federal government and most other provinces understand this. So should our finance department.

Now that Camille Theriault is making the same sort of “I’ll spend some more” noises that Russell MacLellan made before the last Nova Scotia election, New Brunswick soon too may have its Puff the Magic Deficit.